Krueger and Albertson announce plan to combine in $25 billion deal

These days, the largest grocery retailer is Walmart, which generated $218 billion last year from food sales, or 55 percent of its revenue in the United States. Amazon which acquired Whole Foods in 2017, selling groceries on its website, is preparing a smaller presence but putting pressure on competitors as they reach more industry.

It’s an industry at a pivotal turn, after revenue and profits soared early in the pandemic as consumers ate most of their meals at home. Now people are eating more meals away from home than they did two years ago, inflation is chipping away at store profit margins and some shoppers are turning to less expensive stores like Walmart.

In June, Rodney McMullen, CEO of Kroger in Cincinnati, told Wall Street analysts that the chain was seeing a major shift in shopper behavior due to inflation. He said that while some consumers continued to buy premium products, others were “aggressively” turning to brand stores.

However, a little of that appears to have hurt the company’s bottom line. In the last quarter, which ended August 13, Kroger’s operating profit grew 13.7 percent from a year earlier, allowing it to increase its dividend to investors by 24 percent. It also bought back $975 million of its stock this year.

As part of their presentation to regulators, Kroger and Albertsons will likely argue that their combined size is necessary to compete against stores such as Aldi and Lidl — two European chains that are rapidly expanding in the United States — as well as Walmart, Amazon and Costco.

The Federal Trade Commission wasn’t always convinced by this argument. in 2015It successfully sued to block the merger between Office Depot and Staples, even after retailers pitched their merger as an attempt to take over Amazon and drive down prices.

In its review, the FTC will likely consult consumer advocates, competitors, suppliers, and others. Regulators will also look at whether Kroger has promised previous acquisitions would lower prices, and whether those promises have come to fruition. The review can take months, leaving companies and their employees to grapple with uncertainty.

Kroger and Albertsons, both based in Boise, Idaho, said Friday they expect the deal to close in early 2024, and that Krueger will pay Albertsons $600 million if the merger collapses due to antitrust concerns.